Loan that repays itself. Is it possible?
During the last year, we have seen rapid growth of DeFi which stands for “decentralized finance”. Basically DeFi is creating monetary banking services (e.g., issuance of stablecoins) and providing lending and borrowing platforms. First DeFi platform to be launched on Stacks — the Arkadiko protocol — allows borrowers to earn a yield higher than the cost of minting stablecoin USDA. This enables people to take loans with negative interest rates. How does it work?
The success of protocols built on Ethereum has sparked similar initiatives on the layer-1 blockchains. Here comes Arkadiko — a decentralized, non-custodial liquidity protocol where users can collateralize their STX tokens and borrow a stablecoin called USDA — protocol’s flagship product. Why is it different? Because it’s built on Stacks (check my previous post) and secured by Bitcoin.
Arkadiko enables you to gain increased liquidity in the form of a soft-pegged US Dollar stablecoin, while maintaining original asset exposure. Your STX tokens generate a yield, which pays back the USDA loan automatically over time. At current yields, it takes about 3 years to pay back your loan completely.
In order to make use of a self-repaying loan, you need to hold STX tokens. Once you have your STX tokens, you can deposit those in an Arkadiko Vault as collateral. Against the STX collateral, you will be able to borrow an amount of USDA equivalent to 25% Loan-To-Value. Your STX tokens will be stacked in Proof of Transfer (learn more), and will automatically be used to pay off the borrowed USDA.
Let’s say you want to buy a car. You put 400,000 USD of STX tokens in an Arkadiko vault and borrow 100,000 USD against that in the form of stable coin, USDA. Your STX tokens generate a Bitcoin yield, which pays back your car automatically over time. No need to worry about monthly payments.
Everything is paid off automatically through the yield that Arkadiko generates in just three years. (400k USD x 10% = 40k x 3 years = 120k USD).
How does it work? Users minting USDA will earn up to 10% BTC yield on their STX collateral while using their stable coins. This makes the STX more capital efficient without losing any of its inherent capabilities, such as earning a yield in Bitcoin.
This creates a situation where your cost of borrowing USDA is negative. The yield on your collateral is outperforming the interest you pay on your mint.
Governance Token — DIKO
What is more Arkadiko made it’s Governance Token — Diko that is used to participate in governance and can be earned through staking on the Arkadiko protocol.
The total supply of DIKO will be 100M. Over 50M will be emitted to the ecosystem in a liquidity mining incentive program that will span the first 5 years of the protocol.
You can earn DIKO through our liquidity mining program once we are on mainnet. You will be able to stake LP tokens or earn DIKO by creating an Arkadiko Vault, borrowing USDA.
Arkadiko is launching on Stacks this October 21st. 1.5M DIKO will be emitted through an incentive program to early USDA holders in the first 6 weeks of launch. Want more? Enter the Arkadiko Mainnet Giveaway and become one of 50 lucky winners of DIKO tokens.
